LEGAL ETHICS OPINION #1648 ATTORNEY'S FEES; BILLING CLIENT FOR
VALUE OF WORK PRODUCT EXCEEDING EARNED
FEE PER AGREEMENT WITH CLIENT
You have presented a hypothetical situation in which a law firm
classifies each client for whom work is done in categories for the
attorney who originated or brought the client's case in to the
firm, and for the attorney who is responsible for doing the work.
You wish to know whether it is proper to bill additional amounts to
the client for "administrative fees", "processing fees" or "value
billing" (a fixed "percentage add on from 20% to 200%" at the
originating attorney's hourly rate) when the originating attorney
does not actually work on the case. You also state the client has
been told he will be billed on a "time basis" which depends only
on the hourly billing rate of the attorney(s) who perform the work.
In addition, you wish to know the ethical propriety of the law firm
billing the client on an hourly basis where the bill charges the
client for more time than was actually spent by the attorney
working the case. You state that the law firm charges a fee which
represents the "value" of the work product which exceeds the fee
earned on an hourly basis. In all instances, the client is unaware
of these billing practices and is led to believe that the bills
received from the law firm are based solely on time actually spent
or services performed on the matter.
The appropriate and controlling disciplinary rules relative to your
inquiry are DRs 1-102(A)(3) (engaging in conduct which constitutes
a crime or deliberate wrongful act reflecting adversely on fitness
to practice law) and (4) (conduct involving fraud,
misrepresentation, deceit or dishonesty reflecting adversely on
fitness to practice law), 2-105(A) (fees must be reasonable and
adequately explained), and 9-102(B)(3) (a lawyer must render
appropriate accounting to client).
All of the billing practices which you have described are improper
and violate the cited disciplinary rules. Any bill for costs or
fees that are not attorney fees, but which nonetheless classifies
them as such, is a clear misrepresentation in violation of DR 1-
102(A)(4). In Legal Ethics Opinions 1220 and 1509 the committee
opined that masking search and recordation fees in a title
insurance premium is deceptive and violative of DRs 1-102(A)(4), 2-
105(A), and 9-102(B)(3). For the same reasons, the committee
concludes that a billing statement that hides attorney fees under
the guise of another name, that are in addition to the agreed upon
hourly fees is a deceptive practice which violates DR 1-102(A)(4).
See Legal Ethics Opinion 1220 (making attorney's fee under
different name or category is a deceptive practice). If the
additional fees were not explained to the client then the billing
practices which you have described violate DR 2-105(A). The
Committee has also stated in LEO # 1606 that any fee that is not
earned is an unreasonable fee. If the fees are classified as
attorney fees when they are not such, this practice violates DR 9-
102(B)(3).
The "service fee" described in your inquiry, like an administrative
fee, would be proper only if charged in non-litigation cases, the
method of calculating the fee is explained to the client and the
client consents. Legal Ethics Opinion 710. Your inquiry mentions
no such explanation and, in fact, it indicates the service fee is
not for any substantial work. This is a fraudulent claim.
In summary, any lawyer's bill which charges fees or costs for work
not actually performed is fraudulent, unreasonable, not adequately
explained to the client and breaches the lawyer's duty to properly
account to the client.
[DRs 1-102(A)(3) & (4), 2-105(A), 9-102(B)(3); LEOs 710, 1220,
1509, 1606]
Committee Opinion
November 28, 1995